Legal regulation of the trade secret regime in corporate conflicts

Titorenko Semen Konstantinovich Lecturer, Department of International and Public Law Department, Financial University under the Government of the Russian Federation 125167, Russia, Moscow, Leningradsky, 49/2 titorenko96.st@gmail.com Other publications by this author

According to the analytical report "Leaks of limited access information in the world and Russia in the first half of 2023" by the InfoWatch expert and analytical center, the share of trade secret leaks in the world has sharply increased from 11% to 30.4% ^[1].

As V.D. Sattarov notes ^[2], in the context of digitalization of society, measures to protect trade secrets are being transformed. The legal regulation of the trade secret regime should also be subject to revision.

One of the risks of information leakage, which is subject to the trade secret regime, is a corporate conflict between the participants of business companies.

Trade secrets, as a type of confidential information, were introduced after the collapse of the USSR and the transition of the economy to market relations. In 1995, Part one of the Civil Code of the Russian Federation came into force, including Article 139 "Official and commercial secrets".

At the moment, the concept of a commercial secret is contained in the Federal Law "On Commercial Secrets" dated 07/29/2004 No. 98-FZ (hereinafter referred to as the "Law on Commercial Secrets"): "a commercial secret is a confidentiality regime of information that allows its owner, under existing or possible circumstances, to increase income, avoid unjustified expenses, and maintain a position on the goods market, works, services, or to obtain other commercial benefits."

The Law on Trade Secrets uses a broad concept that allows you to extend the confidential information regime to any information that a legal entity operates with.

According to Article 10 of the Law on Trade Secrets, the trade secret regime is considered established in the presence of a number of conditions:

- a list of confidential information has been defined;

- the procedure for handling confidential information and monitoring compliance with such an order has been established;

- records of persons with access to confidential information are kept;

- when applied to a tangible medium, confidential information is marked with a "Trade Secret" stamp.

Trade secrets often become a tool of unscrupulous companies in corporate conflicts.

Article 8 of Federal Law No. 14-FZ dated 08.02.1998 "On Limited Liability Companies" (hereinafter referred to as the "Law on LLC") and Article 91 of Federal Law No. 208-FZ dated 12/26/1995 "On Joint Stock Companies" (hereinafter referred to as the "Law on Joint Stock Companies") grant participants and shareholders of business companies the right to receive information on the activities of companies, familiarization with accounting documents and other documentation in accordance with the procedure established by the charter of business companies.

Unscrupulous business companies often refuse to exercise the participant's right to receive information about the company's activities, referring to the operation of the trade secret regime.

When analyzing judicial practice, several types of violations can be found:

- the use of a trade secret regime introduced in violation of the procedure established by law (for example, the introduction of a trade secret regime by decision of the sole executive body);

- the use of a trade secret regime in the absence of documents that introduce a trade secret regime.

Let's consider the application of the trade secret regime using the example of the Law on LLC.

The first type of violations occurs either in the case of misleading the participants of the company, or in the case of a direct violation of the Law on LLC with the intention to mislead the court and the participant of the company requesting information and documents.

Subparagraph 8 of paragraph 2 of Article 33 of the Law on LLC provides that the competence of the general meeting of the company's participants includes the approval of internal documents of the company. The company's internal documents include the provision on trade secrets.

The issue of classifying information as a trade secret cannot be resolved without the participants of the business company, since information about the company's activities and documents allow the participant to monitor the company's activities.

The second type of violations involves the use of a trade secret regime in direct violation of the Law on LLC with the intention to mislead the court and the participant of the company requesting information and documents.

Neither the Trade Secret Law nor the LLC Law grant a business company the right to arbitrarily extend the trade secret regime to any information that the company does not intend to provide to the participant.

At the same time, it should be noted that the second paragraph of paragraph 4 of Article 65.2 of the Civil Code of the Russian Federation obliges a participant of a business company not to disclose confidential information about the activities of a business company.

In development of this provision, paragraph 15 of the Information Letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 01/18/2011 No. 144 "On certain issues of the Practice of Arbitration courts considering disputes on providing information to Participants of business companies" (hereinafter referred to as the "Information Letter") provides for the obligation of a participant in a business company to issue a receipt if the documents requested by the participant contain confidential information. Confidential information Information letter includes trade secrets, state secrets, banking secrets and other legally protected secrets.

Considering the above, we believe that the current legislation and law enforcement practice is formed solely with the aim of preventing unlawful refusals to exercise the rights of a participant to receive information and documents related to the activities of a business company.

The only exception provided by law enforcement practice is based on Article 10 of the Civil Code of the Russian Federation. According to paragraph 1 of the Information Letter, the court has the right to refuse to satisfy the participant's request for information and documents if the participant abuses his right.

The Information Letter refers to the participant's abuse of the participant's requirement to provide information and documents if the participant is an actual competitor or an affiliate of a competitor, and the requested information relates to the competitive sphere.

Despite the above legislative measures, in the practical sphere, the question remains open how to act for a business company if the commercial secret regime has not been introduced in the company (due to insufficient legal literacy of the company's participants or industrial negligence), and the participant requests the provision of information of any nature (production, technical, economic, organizational and others), including the results of intellectual activity in the scientific and technical field, as well as information about ways of carrying out professional activities that have actual or potential commercial value due to their unknown to third parties, to which third parties do not have free access on a legitimate basis.

In other words, if a trade secret regime has not been introduced with respect to the requested information, and the requested information may have potential commercial value (for example, a customer database of a distributor of certain narrow-profile products).

This situation, in which the main asset of the company becomes open to all participants, creates ideal conditions for raiding enterprises. A participant who has received the right to participate in a business company has the right to dispose of information of potential commercial value at his discretion.

Neither the current legislation nor law enforcement practice take into account cases when, for certain reasons, an operating business company did not take action to introduce a trade secret regime, but which became the target of a raider seizure. E. Kuzhilina notes ^[3] that most companies in the Russian Federation are not engaged in the proper formation of a trade secret regime due to a weak corporate culture.

We believe that in this situation, the presumption of the existence of a trade secret regime should be applied, and the legislator needs to establish the procedure for providing information and documents to the participant, excluding the risk of transferring confidential information to third parties.

In this regard, we believe that the participant of the company is obliged to issue to the business company a receipt for non-disclosure of information and documents received from the business company to third parties, regardless of the purpose for which the participant of the business company requested documentation. This measure will minimize the risks of a business company that has not provided for a trade secret regime in advance, and will not violate the rights of a business company participant who has requested information and documents, since the participant will receive all the requested information, but will not be able to disclose it to third parties.

Along with the proposed measure, we consider it necessary to consider other measures aimed at minimizing the risks of business entities and the risks of a participant in a business entity.

So, one of such measures is a confidentiality agreement, which was considered in the work of A. Bychkov ^[4] as an ordinary way for entrepreneurs in order to eliminate risks for the parties.

Separately, the author notes that there is an objective difficulty in proving damages in cases of disclosure of confidential information and, in this regard, proposes to establish a penalty in case of disclosure of confidential information. At the same time, the author proposes to establish a presumption in which a business company is not obliged to prove the fact of disclosure of confidential information by a participant of the company who applied for the provision of documents and information.

In the proposed situation, if the information received by the participant turns out to be publicly available or from third parties-competitors, the guilt of the participant of the business company will be presumed.

We believe that such a presumption will create an unjustified space for abuse by the business community. In such a situation, if there is a corporate conflict, the business company may independently publish a small part of confidential information and use the presumption to violate the rights of a participant in the business company and its subsequent exclusion from the membership of the company.

In addition, in his article, A. Bychkov examines in detail administrative responsibility and criminal liability for violation of legislation on the protection of trade secrets.

It is important to note, as A. Mitrakhovich points out ^[5], in judicial practice there are rarely cases when sanctions are imposed precisely for the disclosure of trade secrets, but such cases exist. P.G. Fedorov also pointed out the difficulty of proving employee violations related to violation of the trade secret regime ^[6].

A similar situation arises when a participant who has received information from the company that has potential commercial value can independently dispose of it. It is impossible to prove that the information was disclosed by a specific participant. This actualizes the need to demand a receipt from a member of the company, regardless of whether the trade secret regime applies to the requested information or not.

As a result of the analysis of law enforcement practice, A. Bychkov points out that the most common examples of crimes in the field of trade secret legislation include the sale of confidential information by employees and the theft of confidential information for the purpose of further sale and use in the future.

From the analysis conducted by A. Bychkov, the following conclusion can be drawn. A business company has confidential information, regardless of the presence or absence of a trade secret regime, the disclosure of confidential information may cause property damage to the participants and creditors of the business company.

Therefore, the legislator needs to establish a balance in ensuring the protection of confidential information of the business company and respect for the rights of the participant to receive information about the activities of the business company.

We believe that A Bychkov's conclusions confirm the validity of the theses of this article. The trade secret regime does not always apply to confidential information, but this does not exclude the fact that the state must ensure a balance of interests, including those participants who did not ensure the creation of an appropriate trade secret regime in a business company.

The issue of applying disciplinary liability in violation of the Law on Trade Secrets is discussed in detail in the article by N.A. Zhumanov ^[7]. As a result of the analysis, the author comes to the conclusion about the ineffectiveness of the norms of disciplinary responsibility and the forced application of the norms on bringing employees to criminal responsibility for violating the legislation on trade secrets.

D. Martasov, as a result of the analysis of judicial practice ^[8], comes to the conclusion that the commercial secret regime applies to employees of a business company regardless of whether the commercial secret regime was introduced in the business company in accordance with the procedure established by article 10 of the Law on Commercial Secrets.

We believe that a similar practice should apply to the participants of the business company who are not employees of the business company. There is no difference whether an employee of a business company or a member of a business company discloses confidential information. This confirms the need to withdraw a receipt from any member of the company who has requested information with potential commercial value.

Considering the trade secret regime in the United States of America, M.G. Doraev notes ^[9] that the state uses both private law and criminal law means of protecting trade secrets.

In accordance with the conclusions of the study by T.A. Kulizade ^[10], the CIS countries ensure compliance with the trade secret regime with a clear bias towards criminal law remedies. Probably, as previously mentioned, this is due to the underdeveloped corporate culture of the CIS countries.

A study by R.O. Voskanyan and N.G. Voldimirov testifies to the criminal law bias of commercial secret protection tools ^[11].

However, none of the above studies provides for combating the disclosure of trade secrets (confidential information) within the framework of corporate conflicts between participants in business companies.

Meanwhile, corporate conflicts with the demand for documents by the participants of business companies are becoming a frequent phenomenon in judicial practice. Within the framework of the legal regulation of these public relations, it is necessary to establish a balance of interests of business entities and participants of business entities.

Conclusion. We believe that when exercising the right of a participant in a business company to provide information about the company's activities, regardless of whether the company has a trade secret regime, it is necessary to extend the presumption of a trade secret regime, in which the participant is obliged to issue a receipt to the company on the obligation not to disclose information received from the company to third parties. Previously, this measure was applied exclusively to cases when a participant in a business company applied for the provision of confidential information, which is provided for by current legislation. However, since the trade secret regime, due to insufficient legal literacy, is not always applied by business companies, we believe that the information security measure in the form of withdrawal of a receipt should be applied regardless of the existence of a trade secret regime in a business company.